Revealed: The truth about Aussie

1972240 · 发表于 4-2-2011 17:55:07

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By Kris Sayce
Money Morning Australia
If you’re thinking of buying an investment property in Australia in the next 24 months – or even if you just
own property – you need to read this report now.
Because it could be the only honest info you get on Aussie real estate this year.
Basically, there are two schools of thought when it comes to investing in Aussie property.
On one side, you’ve got a very vocal group of property spruikers – they believe things are pretty much okay
and house prices are supported by population growth, low interest rates and a so-called chronic housing
shortage.
On the other is a smaller group of housing sceptics – they think Aussie property is in a bubble that’s been
fuelled by easy credit and stimulus (low interest rates and first-home buyers’ incentives) – and as the stimulus
gets wound back the bubble will burst, sending property prices tumbling.
I tip my hat to the spruikers. They produce great spin. Take a look at these chestnuts from the OHL Group’s
2010/2011 Property Investment Report.
• ‘Massive population growth and a shrinking land supply are combining to create record price growth
and auction clearance rates’
• ‘Australia’s population growth continues to surge ahead, creating unprecedented demand for
Australian housing’
• ‘A recent government decision just massively reduced the amount of land available for residential
development in the designated growth corridors’
• ‘The best strategy in a rising market is to buy at a fixed price off the plan. You are effectively buying a
property at today’s price, but not having to pay for it until it has already had significant growth’
If you feel a bit sceptical about those facts, you’ve good reason to!
But if you read that in the OHL report – and didn’t know any better – you could easily be tempted to rush
out and buy a rental property right now. And why not? The thought of getting something ‘rare’ for ‘cheap’
today and selling it to a foreigner for a tidy profit tomorrow is very appealing.
I’d do it. (That is, if I didn’t already know property is a riskier investment than shares right now!)
You see, there are people out there – unscrupulous salesmen and women – with a vested interest in selling
you property.

1972240 · 发表于 4-2-2011 17:56:10

They’re money lenders, property developers and real-estate agents who make a living flogging you loans
and houses...
And they’ll say anything to convince you to buy...
• ‘Retire knowing you’ll have a steady stream of rental income to rely on – because people will always
need a house to live in...’
• ‘If you own an investment property portfolio it’ll show your friends and family you’re a real success!’
• Or this, a quote from David Airey, president of the Real Estate Institute of Australia, in The Australian
on 29 July 2010 – ‘Australians value property so highly as a means of security and haven for their
families…’
And then they say things to help rationalise your decision to buy. Some of their favourite choruses include
‘property doubles in value every 7–10 years’ and ‘housing prices won’t tumble because they’re propped up
by population growth’.
But it’s a bunch of lies – as I’ll show you in a second.
Here’s an example of the property spruiker’s logic in action... take a look at these news articles...
House prices set to soar
An undersupply in the Australian property market will force residential property prices up by 30%,
according to a BIS Shrapnel chief economist
International Business Times 27 July 2010
Housing Shortage Makes Australian Home Prices Almost Twice U.S.
... a shortage of 200,000 dwellings... is helping fuel Australian home prices, which are 82 percent
higher than in the U.S.
Bloomberg Business Week 5 July 2010
Would you believe this data is based on statistics that include HOMELESS figures and immigration numbers?
(Which don’t account for whether people are moving to Australia to live with their families or buying their
own homes?) Well they are. It’s madness.
But in the property spruikers’ minds, a population increase means more demand for houses which means
higher house prices, which means, ‘Buy before it’s too late!’
These catchcries are parroted by real-estate ‘experts’ across Australia. And most of us readily accept them...
That’s why I’m writing today. To show you – using plain old common sense – Australia is in the midst of a
housing bubble. Then I’ll show you why the property experts believe Australia is different – and show you
why they’re wrong. Finally I’ll show you where to go to get the best contrarian advice anywhere in Australia.
Right, first things first...

1972240 · 发表于 4-2-2011 17:57:36

Are Aussie house prices in a bubble?
According to the NSW government’s Centre for Affordable Housing –
‘Housing is affordable when households that are renting or purchasing are able to pay their housing
costs and still have sufficient income to meet other basic needs such as food, clothing, transport,
medical care and education... housing is affordable if it costs no more than 30% of a household’s
gross income.’

As you can see, property in Melbourne Victoria hasn’t been anywhere near that level since 1997.
According to this chart, a median-priced property will set you back 7.8 times the average Aussie salary...
or to put it another way, if you’re earning the average $68K wage over 85% of it will be spent on your
mortgage!
But it’s not only Melbournians who suffer.
According to the ‘2010 International Housing Affordability Survey: Rating for Metropolitan Markets’,
Australia is home to 22 of the top 58 most unaffordable metro housing markets in the world.
I’ve underlined them in red.

1972240 · 发表于 4-2-2011 18:26:16

The most affordable Australian metro area to buy in on the list will still set you back 5.4 times the average
annual salary!
And that’s before you take into account some of the hidden costs of housing.
‘If you buy an investment property, you’re paying maybe 4 per cent stamp duty on the actual total
price, not just your investment. Say you’re buying a $500,000 house, so you’re paying $20,000 in
stamp duty. If you’ve only got a $50,000 deposit, you’re paying $20,000 transaction cost on the
$50,000 that you have invested... You also have your interest and maintenance costs along the way,
which can also be very substantial.’
Ron Bewley, Woodhall Investment Research – The Australian, 28 July 2010
So what is a housing bubble?
The word ‘bubble’ gets bandied about so much that it’s almost lost all meaning. Here’s a quick definition...
A housing bubble is what happens to house prices in a residential market when valuations increase to
unsustainable levels – quickly. Like say, 7.8 times the average annual salary!
Take a look at the chart below for a clear picture of what I mean. It’s a comparison of US, Japanese and
Australian residential house prices from 1980 to 2010.

1972240 · 发表于 4-2-2011 18:28:17

House prices post largest fall since April 2008
In the three months to June, all capital cities experienced virtually no growth or a fall in values, with
5
the exception of Adelaide, the RP Data-Rismark Hedonic Home Value Index has found.
www.news.com.au

Home prices drop after 17 months of gains
National city home prices fell for the first time in 18 months in June, as rising interest rates sent auction
clearance rates lower.
www.news.com.au
Of course the property spruikers aren’t worried. They predict house prices will level off. You know... until the
economy sorts itself out. And then prices will start soaring again.
It’s as if they don’t understand why prices are as high as they are. They talk about population growth
and land shortages as if that explains everything. But that’s not what’s driven the median house price in
Melbourne up by 243% since 1996...
How the government increased your mortgage by 109.9%
Here’s the skinny.
Government stimulus is the central driver of the over-heated property market.

1972240 · 发表于 4-2-2011 18:30:25

It started in the year 2000.
The first-home buyer’s grant artificially stimulated demand for properties by
pressuring first-home buyers to jump into the real-estate market before they were ready. Because they had to
claim the handout before the government decided to take it back.
So they got their ‘free money’ and started buying up property... and the fierce competition for properties
(along with the free money) made them feel free to overpay to seal the deal.
This buying frenzy – stirred up by first-home buyers desperate to start climbing the property ladder – pushed
house prices at the lower end of the scale up quickly.
This prompted home owners to sell in order to cash in on their property’s inflated ‘value’. They then became
a part of a group of second-home buyers, looking to upsize to a bigger, better house…
And so on and so forth.
It’s the greater fool theory. Up until recently the Ponzi has been allowed to grow because of the belief that
someone else will overpay for the house that
you overpaid for.
And it helped push the median property
price in Melbourne up from $249,800 to
$524,500
Things really heated up in the months
leading up to the highly publicised pull back
of the first-home owner’s grant (30 December
2009). Interest rates were still at or near an
all-time low 3% – and nobody wanted to
miss out.

[ 本帖最后由 1972240 于 4-2-2011 18:33 编辑 ]

1972240 · 发表于 4-2-2011 18:43:37

Government stimulus is the central driver of the over-heated property market.

Now is 2011, the Goverment stimulus is gone.
The strong AU dollor and weak US dollor time has come, so the overseas buyers are scared of
the AU property market and jumping into super cheap US property
market. 150,000 international studernts will be driven
out of this country this year, leaving lots of rental properties on the market soon.
While the immigrate population has been dropping
sharply by the new government policy. So what will happen, you can guess...

history tells us that’s not how bubbles work...
Why the Aussie Property Boom is not ‘Different’
Jeremy Grantham – chairman of the board of Grantham Mayo Van Otterloo – had this to say on a visit to
Australia in June 2010...
‘Bubbles have quite a few things in common but housing bubbles have a spectacular thing in
common, and that is every one of them is considered unique and different.’
‘Housing market a ‘time bomb’, says investment legend‘ The Australian 16 June 2010
Before the Japan bubble burst back in 1990, economists argued
that rising house prices in Japan reflected the country’s rapidly
growing wealth. They said the price growth was sustainable
because there was a land shortage in Tokyo. Then the bubble
burst.

[ 本帖最后由 1972240 于 4-2-2011 18:52 编辑 ]

1972240 · 发表于 4-2-2011 18:48:04

At the peak of the bubble, the Japanese Imperial Palace in Tokyo
was worth more than the entire state of California.
Afterwards it was worth considerably less.
On 31 December 2006, Peter Schiff, the president of Euro Pacific
Capital, said this on US TV...
‘Today’s home prices are completely unsustainable. They
were built up to these artificial heights by a combination
of temporarily low adjustable rate mortgage [(ARM)]
payments, by a complete absence of any lending standards and by speculative buying.
And what’s going to happen in 2007 is that a lot of these artificially low ARM payments are going to
be re-set upwards.
You’re going to start to see both the governments and the lenders re-imposing lending standards and
tightening up on credit. And you’re going to see a lot of the speculative buyers turn into sellers. And
these sky-high real estate prices are going to crash back down to Earth.’
People argued that ‘land shortages’ in US states where the property market was booming would sustain
house-price growth... then the sub-prime mortgage implosion popped the US housing bubble... and that led
to the major downturn of 2007...
In Q3 2007 the median price of a home in Long Beach California was $602 900 – in Q3 2008 it was
$391 400

1972240 · 发表于 4-2-2011 18:51:02

Schiff was right. There was a major correction in the house price. And the US real-estate market still hasn’t
recovered. (You can still buy property in Detroit for less than US$5 000!)
But his argument – that only the ‘paper’ value of real estate had increased and it would crash when rates
rose and easy credit was wound back – was ridiculed by other ‘experts’.
In much the same way that housing sceptics are shouted down by property spruikers in Australia.
Ultimately, Schiff was right. Just as the sceptics here will be proved right. Easy, no-doc loans and low
mortgage rates combined to entice a lot of people into buying property. Some buyers borrowed 95+ per
cent loan-to-value ratio – and these people were forced to sell when interest rates inevitably rose.

Take a look at these two charts.

I don’t know about you, but to me it looks like low-interest rates sucked a lot of people into the market –
pushing real-estate prices up. When people could no longer afford to get in, demand dropped – and when
demand dropped so did the prices.So why couldn’t the same thing happen here?

1972240 · 发表于 4-2-2011 18:53:26

Is there really a housing shortage in Australia?
On 3 May 2010, published author and respected US financial commentator Edward Chancellor said
Australia was in the midst of an unsustainable housing bubble.
‘If house prices were to revert to their historic long-term average (ratio of average price to average
income) they would fall quite considerably. It’s the rising interest rates, particularly with real estate
bubbles, that tend to generate the collapse.’
But Commonwealth Bank economist, Michael Workman had a different idea: that foreigners couldn’t
possibly understand ‘the growth outlook here [in Australia or] the under-supply of dwellings’.
Workman pointed out – just like many spruikers before him – that Australia is in a unique position. One in
which he believed strong population growth, a housing shortage, low unemployment and historically low
interest rates would keep driving house prices higher.
Other local experts chimed in with their two bob’s worth...
Macquarie interest rate strategist, Rory Robertson, said in The Age –
‘According to RP-Data/Rismark, house prices rose at a 5 per cent annualised rate over April and
May after gaining 13 per cent on average over the year to March... [so] wave “good-bye” to the
earlier double-digit growth rates that excited so
much silly talk about “bubbles”.’
And – according to Bloomberg – Australian Property
Monitors said a shortage of 200 000 dwellings in
Australia had helped to put a floor under house prices.
But in spite of this, The Economist released its ‘fair value’
calculation of housing prices on 14 July 2010 – based
on the comparison of the 2010 house-price-to-rent ratio
to historic ratios. And it found Australian property was
overvalued by 61 per cent.

1972240 · 发表于 4-2-2011 18:56:37

Here’s another chart used by the RBA’s Luci Ellis which
unwittingly should help to dispel the myth that rising
population growth is necessarily linked to house price
growth:
10
Money Morning Australia Special Report
Prof. Steve Keen pointed out in an article for Business Spectator that if population growth running faster than
new dwelling growth leads to rising house prices, why didn’t house prices fall between 1955 and 2004
when dwelling growth exceeded population growth?
The simple answer is that the real driver of house prices is easy credit. Plain and simple.
How cheap money creates credit bubbles
Just in case you missed it, Australians were enjoying historically low interest rates over 2008–09 – and
property developers and advertisers used this as a key point to sell first-home buyers and investors on
housing.
Take note of the low of 1997 – at that point, interest rates were the lowest they’d been since the 1970s. It
played a part in helping fuel the boom that pushed Australian housing to new levels of unaffordability.
And when that stops – which it hasn’t yet, remember... POP!
But the ANZ Bank’s head of property and financial system research in 2010, Paul Braddick, has another
theory… house prices have risen mainly because interest rates are lower. So because of that, there is no
bubble and houses aren’t over-priced.
‘International comparisons of house price to income ratios have been widel y used to suggest
that Australian house prices are significantly overvalued. These analyses are not only
dangerously simplistic but explicitly ignore a key component of the housing affordability
equation – interest rates.’
He continues:
‘In Australia, the house price to income ratio rose from an average of around 3 in the 1980s to
an average around 5 since late 2003. That is, the median house price in recent years represents 5
times the average household’s annual disposable income compared to 3 times in the 1980s.’

samchen · 发表于 4-2-2011 23:24:28

看了无数预测房价的，不管是澳洲还是中国或者美国，基本都不准。

kinkui · 发表于 5-2-2011 02:36:13

The truth you never know

tsou899 · 发表于 5-2-2011 07:07:22

看看就好,誰能未卜先知?nobody

1972240 · 发表于 6-2-2011 23:53:44

Japanese said "our market is different";
HKnese said "our market is different";
Yankees said "our market is different";
Irish said "our market is different";
...

Now Chinese say "our market is different";
Aussies say"our market is different";

I sincerly hope China and Australia are really "different".

1972240 · 发表于 6-2-2011 23:59:31

Japanese said "our market is different";
HKnese said "our market is different";
Yankees said "our market is different";
Irish said "our market is different";
...

Now Chinese say "our market is different";
Aussies say"our market is different";

I sincerely hope China and Australia are really "different".

akaka · 发表于 7-2-2011 14:13:28

求翻译。。。

1972240 · 发表于 11-2-2011 15:48:26

原帖由 akaka 于 7-2-2011 14:13 发表

 登录/注册后可看大图

求翻译。。。

Translate.google.com

alanrrll · 发表于 11-2-2011 16:28:56

那买还是不买?

1972240 · 发表于 11-2-2011 16:47:12

If I have enough cash and do not mind the price decrease in the coming 3 years, then I would probably buy one.

Everyone has different life, so only yourself can make best choice.

retrieve · 发表于 11-2-2011 16:53:27

求总结一下，英文也行。就一个字买还是不买?

gentleman · 发表于 11-2-2011 17:21:48

楼主出来说话！

unamedplayer · 发表于 11-2-2011 20:37:02

A much more readable version at http://www.moneymorning.com.au/r ... ouseprices-2010.pdf

Some interesting discussions at http://s4.zetaboards.com/Australian_Property/topic/8356472/1/

raveswel and shadow's comments make sense to me.

[ 本帖最后由 unamedplayer 于 11-2-2011 20:44 编辑 ]

1972240 · 发表于 21-2-2011 17:47:04

原帖由 gentleman 于 11-2-2011 17:21 发表

 登录/注册后可看大图

楼主出来说话！

Japanese said their real estate market was different;
Hongkongnese said their market was different;
Yankees said their market was different;
Irish said their market was different and their unemployeement rate is vey low (3 years ago);

Now also Ausie brokers say Australian market is different, the price will be always going up. So what you r are waiting for ?
I do hope the economy is always good and Ausie market is different.

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Different Market in Australia ?